IN MAY 2009 the Chinese consulate in New York invited Ian Bremmer to take part in a small seminar on “the current financial crisis”. The diplomat who organised the event was the very embodiment of the new China—sporting a well-tailored suit and speaking only lightly accented English—and he began the discussion with a bold question: “Now that the free market has failed, what do you think is the proper role for the state in the economy?”

Twenty years ago the state was on the defensive across most of the world. Margaret Thatcher and Ronald Reagan had smashed the post-war consensus. Soviet Communism had collapsed. And the World Bank and the IMF were preaching the “Washington consensus” of privatisation and liberalisation.

China was the most conspicuous standout against this trend. The Communist Party greeted the global revolution by adopting what it termed the “bamboo policy”—bending with the wind rather than standing straight and eventually snapping. The party bent with the wind by abandoning central planning. But it only embraced capitalism in so far as it could be used as an instrument of state power.

China has been transformed from a standout into a global model. The recent financial crisis was clearly a turning-point. The Chinese relished the fact that the Americans had been forced to prop up not just their banks but also industrial companies such as General Motors.

Even before the crisis the Chinese felt that history was moving in their direction. Russia's experiment with laissez-faire had proved to be a debacle. Financial problems had emerged with sickening regularity. And throughout this turmoil China had succeeded in combining an astonishing rate of growth with social stability. Now it is using its $2.3 trillion in foreign reserves to help prop up America's profligacy.

From Latin America to the Middle East authoritarian governments are imitating China's model of “state capitalism”. They are not only using state companies to shore up their power at home, they are directing those companies to reap the fruits of global capitalism. State-controlled manufacturers sell goods on the global market and buy up natural resources. Sovereign-wealth funds invest the profits from all of this activity in global markets.

The rise of this new hybrid has led to a dramatic change in the balance of power between the state and the market. State oil companies control three-quarters of the world's crude oil reserves. Three of the four largest banks by market capitalisation are state-controlled. The biggest mobile- phone operator, China Mobile, is also a state company. A nice example of the changing balance of power occurred in the same month that Mr Bremmer attended his seminar in New York: America's largest bank, the Bank of America, was forced to sell its 9% stake in the Construction Bank of China just to stay afloat.

Two books focus on this fascinating subject. Mr Bremmer's is the better read; he provides a wide-ranging account of the rise of state capitalism and he litters his prose with apposite examples and acute insights. Nobody with a serious interest in the current dilemma should pass it by. “The Beijing Consensus” by Stefan Halper, an American academic at Cambridge University, is narrower. He seems to have spent too much time chewing the fat with his fellow policy intellectuals and not enough getting his boots dirty.

But he does provide a valuable supplement to Mr Bremmer's book. Mr Halper supplies chapter and verse on the way the Chinese are spreading their influence across much of the developing world, by coughing up no-strings-attached loans, for example, rather than trying to meddle in other countries' internal affairs in the manner of the World Bank and the IMF. He also serves up by far the best anecdote about the real workings of state capitalism. In the same month that Mr Bremmer was attending his seminar the Chinese Communist Party ordered local officials in Hubei province to smoke nearly a quarter of a million packs of Hubei-branded cigarettes in order to boost the local economy and stave off lay-offs. Official cigarette monitors roamed the province making sure that people hit their cigarette targets and fining those who dared to smoke other brands.

How serious a threat does state capitalism pose to the market model of capitalism? Messrs Bremmer and Halper are actually less bullish about the new authoritarianism than the titles of their books might suggest. Mr Bremmer, the president of the Eurasia Group, a political-risk consultancy, points out that state capitalism's fate is bound up with the fortunes of some very unpleasant political cliques, such as the Saudi royal family and the Russian oligarchy. Mr Halper demonstrates that China is casting its lot with a number of nasty regimes. Both authors might also have made more of the fact that there is a lot of evidence to suggest that state companies are less productive and innovative than their private-sector competitors. Much of the dynamism of the Chinese economy comes from private companies rather than bloated state firms. There are good reasons for thinking that state capitalism will eventually collapse as a result of what Marxists used to call its internal contradictions. But at the moment it looks as if eventually may be some way off.